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Statoil to become an operator on the US Marcellus shale

The Norwegian producer has made an acquisition of 70,000 acres in southeastern Ohio and West Virginia

Norwegian producer Statoil will become an operator the US Marcellus Shale play for the first time, following its $590 million acquisition of 70,000 acres in southeastern Ohio and West Virginia. 

Sellers were not disclosed; however Bloomberg reported that they included privately-held producers, Petroedge Resources and Tulsa-based Protege Energy, and a Texas private equity fund. The deal is effective from 1 September 2012.

Statoil estimates the lands hold between 300m and 500m barrels of oil equivalent (boe) of risked reserve potential in the liquids window of the shales. The assets are presently producing about 5,000 barrels of oil equivalent a day (boe/d). 

Though the deal increases Statoil’s Marcellus production by roughly 1%, the company has boosted its land position in the Marcellus by 10% to 750,000 acres, a move Statoil executives describe as a “step-wise” strategy of US expansion.

“We are an operator in the Bakken, we are on schedule to become an operator in the Eagle Ford next year and with this transaction Statoil will become an operator in the Marcellus,” said the company’s US onshore vice-president Torstein Hole.

Since 2008, Statoil has been a joint-venture partner with Chesapeake Energy covering some 680,000 acres in the Marcellus. The venture that produced 63,000 boe/d in the third quarter of 2012. Statoil said it hopes to increase its US production to 500,000 barrels per day (b/d) by 2020, with about half of that expected to come from onshore unconventional plays.

The timing of that growth and the rate of future US capital expenditures will depend on commodity prices. In October, Statoil cut its planned US natural gas production forecast by about 25,000 boe/d in response to lower US natural gas prices. It said it would ease off activity in dry gas areas and reallocate investment to oil-rich acreage.

But that was before Henry Hub futures fell from a peak of $4.04 per million British thermal units (Btu) in November to $3.35/m Btu on the last trading day of 2012, well below the Energy Information Administration’s (EIA) full-year forecast of $3.68/m-Btu for 2013.

But the deal shows Statoil is taking a long-term approach, using low prices to better position itself ahead of an upturn.

However, the gas market’s turning point is not expected until 2015 – and that projection is dependent on the US allowing large-scale liquefied natural exports.

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